Over the past several months, many disputes have arisen over whether the COVID-19 pandemic or government responses to it provide, depending on the jurisdiction, an impossibility or impracticability defense for nonperformance under a contract. Now, we are beginning to see a flood of decisions addressing that defense.
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Patterson Belknap’s Commercial Division Blog covers developments related to practice and case law in the Commercial Division of the New York State Supreme Court. The Commercial Division was formed in 1993 to enhance the quality of judicial adjudication and to improve efficiency in the case management of commercial disputes that are litigated in New York State courts. Since then, the Division has become a leading venue for judicial resolution of high-stakes and every-day commercial disputes. This Blog reviews key developments in the Commercial Division, including important decisions handed down by the Commercial Division, appellate court decisions reviewing Commercial Division decisions, and changes and proposed changes to Commercial Division rules and practices. Our aim is to provide you with thoughtful and succinct analysis of these issues. The Blog is written by experienced commercial litigators who have substantial practices in the Commercial Division. It is edited and managed by Stephen P. Younger and Muhammad U. Faridi, who spearheaded the publication of the New York Commercial Division Practice Guide, which is part of Bloomberg Law's Litigation Practice Portfolio Series.
Court of Appeals Holds Bankruptcy Law Does Not Preempt Lender’s Tortious Interference Claims Against Third-Party Non-Debtors
In Sutton 58 Associates LLC v. Pilevsky, the New York Court of Appeals recently held in a 4-3 split decision that, under certain circumstances, bankruptcy law does not preempt a lender’s state law claims against third-party non-debtors for tortious interference with a contract between the lender and the debtor. This decision preserves a state forum for lenders asserting claims that: 1) involved “wrongful conduct by non-debtor defendants that occurred prior to the bankruptcy proceeding,” and 2) are “grounded in independent contractual obligations."
In Lazar v. Attena LLC, Justice Andrea Masley of the New York County Commercial Division granted Arik Mor and Uriel Zichron’s (together, “Respondents”) motion to dismiss a petition to dissolve three limited liability companies, Attena LLC, Hemera LLC, and Nessa LLC (collectively, the “LLCs”). The Court’s opinion addressed whether the LLCs should be dissolved on the ground that they were no longer functioning in accordance with their stated purpose, which was defined broadly to include “any lawful business purpose.”
A common question in the wake of the COVID-19 outbreak has been whether the pandemic or governmental responses to the pandemic provide, depending on the jurisdiction, an impossibility or impracticability defense for nonperformance under a contract.
The answer to that question will, of course, turn on the facts underlying the nonperformance, as well as the law of the jurisdiction. Two recent decisions from New York are instructive on the contours of the defense of impossibility — the relevant defense under New York law.